Time to put your Big Bank shorts on! Get ready for arun…
The chickens are coming home to roost. Reality is catching up with the market riggers (Fed, ECB, PPT, CIA) and the “too big to fail” banks are getting whacked. Trillions of dollars in bailouts and legalized (FASB) accounting fraud cannot save these insolvent zombie banks any longer. The Grim Reaper is on the horizon and his sickle will do what paid off politicians won’t, cut ‘em down to size. So get your silver stake ready, time to plunge it into their vampire squid hearts.
Big banks worldwide are shedding jobs like it’s 2008 all over again.
European Bank Job ‘Bloodbath’ Surpasses 40,000
UBS AG’s decision to cut 5 percent of its workforce brings to more than 40,000 the number of jobs cut by European banks in the past month as the region’s worsening sovereign debt crisis crimps trading revenue.
UBS, Switzerland’s biggest bank, said yesterday it will eliminate 3,500 jobs, mainly from its investment bank. It follows HSBC, which announced 30,000 cuts on Aug. 1, Barclays, which is cutting headcount by 3,000, and Royal Bank of Scotland Group, which is eliminating 2,000 posts. Credit Suisse Group AG announced 2,000 reductions on July 28….
“It’s a bloodbath, and I expect things to get worse before they get better,” said Jonathan Evans, chairman of executive- search firm Sammons Associates in London. “I cannot see a lot of those who have lost their jobs getting re-employed. Regardless of how good someone is, no one wants to talk about hiring. Life will be very difficult for two or three years.” [read full report]
Global Banks Poised to Slash 101,000 Jobs in Fastest Reductions Since 2008
The biggest global banks are cutting jobs at the fastest rate since 2008 as a weak U.S. economy squeezes revenue, regulators push firms to hold more capital and companies restructure businesses…. The 50 largest banks, including HSBC Holdings Plc (HSBA), Credit Suisse Group AG (CSGN) and Bank of America Corp. (BAC), disclosed plans for almost 60,000 reductions since Jan. 1, according to company statements and data compiled by Bloomberg Industries. At that pace, they’ll cut more than 101,000 jobs this year. [read full report]
Layoffs sweep Wall Street, along with low morale
In early summer, before layoffs began sweeping across Wall Street, billboard-sized photos of employees were plastered on the walls, pillars and elevator banks of Credit Suisse Group AG’s offices in the United States and abroad.
The museum-quality prints, depicting workers from administrative assistants to senior executives, were emblazoned with motivational words like “Proactive” and “Partner.” By mid-July, however, the photos disappeared and the Swiss banking giant began laying off 2,000 employees.
Security guards prevented employees from taking cell-phone pictures as the posters were stripped away, according to one employee who was present.
“It sent an entirely wrong message,” said an employee, who was not authorized to speak publicly. “Management literally threw away that kind of money on something so trivial, while planning to cut thousands of jobs.” [read full report]
Big bad Bank of America is reeling:
BofA cutting 3,500 jobs this quarter: memo
Bank of America Corp plans to cut 3,500 jobs in the next few weeks as CEO Brian Moynihan tries to come to grips with the bank’s $1 trillion pile of problem home mortgages.
The job cuts, which the Wall Street Journal said could rise to 10,000 in coming months, follows a series of quarterly losses over the past two years by the biggest U.S. bank, including a record loss of $8.8 billion in the latest quarter. [read full report]
And right on cue, bankster puppet Obama comes to the rescue:
Corrupt Obama Administration Pressuring New York Attorney General to Support Mortgage Whitewash
The Administration has now taken to pressuring parties that are not part of the machinery reporting to the President to fall in and do his bidding. We’ve gotten so used to the US attorney general being conveniently missing in action that we have forgotten that regulators and the AG are supposed to be independent. As one correspondent noted by e-mail, “When officials allegiances are to El Supremo rather than the Constitution, you walk the path to fascism.”
Revealingly, one of the Administration’s allies said: “Wall Street is our Main Street.” And the worst is that this remark may not be a cynical Ministry of Truth pronouncement. Team Obama bears all the hallmarks of being so close to banks and big corporations that it has lost all contact with and understanding of mainstream America.
The latest example is its heavy-handed campaign to convert New York state attorney general Eric Schneiderman to a card carrying member of the “be nice to our lords and masters the banksters” club. Schneiderman was the first to take issue with the sham of the so-called 50 state attorney general mortgage settlement. As far as the Administration is concerned, its goal is to give banks a talking point and prove to them that Team Obama is protecting their backs in a way that the chump public hopefully won’t notice.
The Administration joined this effort to hurry it forward and assure it resulted in a suitably financier-friendly outcome. And it has done so despite recent HUD inspector general’s audits finding that the five biggest servicers were defrauding taxpayers. We’ve heard not a peep of follow up on that front; instead, the Administration keeps leaking its tired “A settlement is just around the corner” story. [read full report]
And then, the bankster hit…
New York Attorney General Kicked Off Government Group Leading Foreclosure Probe
New York Attorney General Eric Schneiderman on Tuesday was kicked off the committee leading the 50-state task force charged with probing foreclosure abuses and negotiating a possible settlement agreement with the nation’s five largest mortgage firms….
The government launched the negotiations in the spring after widespread reports of foreclosure irregularities, such as so-called “robo-signing” and illegal home seizures, emerged.
But state prosecutors and federal officials are pressing to complete a proposed settlement with the five companies even though they’ve initiated only a limited investigation that hasn’t examined the full extent of the alleged wrongdoing….
Schneiderman, a Democrat who’s in his first term as New York’s top law enforcer, has been among a group of state legal officers who has also questioned the desire for a speedy resolution. He’s leading his own investigation into mortgage improprieties, subpoenaing documents from the nation’s largest financial institutions and reviewing court records for possible illegal home repossessions.
The Obama administration officials — in particular, Treasury Secretary Timothy Geithner and HUD Secretary Shaun Donovan — have publicly stated on numerous occasions that they want a quick resolution to the 50-state mortgage probe….
These attorneys general have said they’re reluctant to sign on to an agreement that effectively kills their ongoing investigations or prevents new ones from being launched….
In a statement of support for Schneiderman, Biden said that the “events leading up to the mortgage crisis must be fully investigated, including origination and securitization practices, before any broad immunity is granted.”
“The American people deserve an investigation,” he added.
Top Obama administration officials recently reached out to Schneiderman and his allies, effectively requesting he get in line, people familiar with the discussions said. [read full report]
Is yet another attempt at covering up big bank crimes by the Obama Admin going to save Bank of America?
As my old friend L.L. would say, “Man… I don’t think so.”
Visualizing How Bank Of America’s Reserve Accounting Errors Are One Giant “Subprime CDO”
About a month ago we penned an article titled (and asking) “Is Brian Lin The Next Incarnation Of Joe Cassano?” in which we sought to demonstrate just on what flimsy ground Bank of America has based its litigation reserve assumptions: a topic that since then has become the biggest sticking point in the BAC bull thesis. Considering that since then, Bank of America default risk has exploded by over 150% and the stock price has plummeted by half, at least some have grasped the severity of a situation when incremental flawed assumptions are magnified level after level, until we finally get what, as Manal Mehta terms it, is a Bank of America “Subprime CDO.” Since this issue is extremely important to the future of the financial system (a bankruptcy of Bank of America would be hundreds of times more severe than Lehman’s)… which once again brings us to our question: will the man behind the BAC litigation reserve fraud be responsible for the next iteration of an AIG-type implosion? [read full report]
What about Warren Buffet? He saved Goldman Sachs with a bailout in 2008. Can he save Bank of America?
Warren Buffett to invest $5 billion in Bank of America
Warren Buffett’s Berkshire Hathaway will invest $5 billion in Bank of America, stepping in to shore up the company in the same way he helped prop up Goldman Sachs during the financial crisis. Bank of America shares rose 24 percent to $8.65 in early trading, erasing a large part of the stock’s August losses….
Bank of America will sell Berkshire 50,000 shares of cumulative perpetual preferred stock with a 6 percent annual dividend…. Bank of America can buy back the investment at any time by paying Buffett a 5 percent premium. Berkshire also will get warrants to buy 700 million Bank of America shares at an exercise price of just over $7.14 a share, with the ability to exercise any time in the next 10 years. [read full price]
When it comes to Wall Street, Warren puts his money where his mouth is. When it comes to Main Street, all we get is meaningless talk.
Open Letter to Warren Buffett: Put Your Money Where Your Mouth Is
If you are truly sick and tired of the “mega-rich” being “coddled” by a “billionaire-friendly Congress,” as you said in your recent NY Timeseditorial, why don’t you back up your words with some real action and put your money where your mouth is? [Read More]
Warren’s bailout will help BofA over the short run, but $5 billion is just a drop in the bucket when it comes to their problems. The only thing his $5 billion will accomplish is a temporary run up in stock value so everyone who has been killed on the plummeting stock price can then jump out without complete loss. As you will see here, their problems are severe.
This is the report on BofA by Henry Blodget that has caused quite a stir over the past few days:
Here’s Why Bank Of America’s Stock Is Collapsing Again
Here are some of the things that the Bank of America observers think should or will be subtracted from the bank’s $222 billion of book value:
* $15-$20 billion in Increased mortgage-litigation reserves….
* Some percentage of $80 billion of “second mortgages.” …
* Some percentage of $47 billion in commercial real estate loans….
* A healthy percentage of $78 billion of “goodwill.” Bank of America built itself by acquisition. “Goodwill” is what’s left over when management overpays for something….
* Untold amounts of exposure to collapsing European banks and sovereign debt…
So, taking some back of the envelope numbers, it looks as though we could easily come up with, say, $100-$200 billion in write-offs and exposures to “clean up” Bank of America’s balance sheet.
A $100-$200 billion hit to Bank of America’s $222 billion of equity capital, needless to say, would do some serious damage. Specifically, it would force the company to raise about the same amount to restore its capital ratios. [read full report]
In related news, Mortgage Payments One Month Late Jump as Economy Weakens andHome Sales Are Falling: Mortgage purchase applications plummeting to lows.
Did you get your shorts on yet? Jump right in and swim with the sharks…
Sharks Circling: BAC CDS Near All-Time High
The chart of 1-year CDS speaks for itself: spreads are near the 2009 peak. Meanwhile the 5-year spreads are higher than ever, as the yield curve inverts on the long end. [read full report]
It’s not just BofA, it’s a full blown…
U.S. Bank CDS Above 2010 High, Worse Than Bear Stearns Peak, Closing in on Lehman Levels
Unsettling data point: The U.S. Bank CDS Average is above the level it peaked at in March 2008 and May 2010. The only time it was higher was during the height of the financial crisis in late-2008 and early-2009. [read full report]
And of course those big Euro banks are getting hit hard as well:
Euro Bank CDS Surge To All Time Record After Collapse In German IFO Business Survey, Discord Over Eurobonds, Greek 2 Years Over 40%
Market crash ‘could hit within weeks’, warn bankers
A more severe crash than the one triggered by the collapse of Lehman Brothers could be on the way, according to alarm signals in the credit markets.
Insurance on the debt of several major European banks has now hit historic levels, higher even than those recorded during financial crisis caused by the US financial group’s implosion nearly three years ago.
Credit default swaps on the bonds of Royal Bank of Scotland, BNP Paribas, Deutsche Bank and Intesa Sanpaolo, among others, flashed warning signals on Wednesday. Credit default swaps (CDS) on RBS were trading at 343.54 basis points, meaning the annual cost to insure £10m of the state-backed lender’s bonds against default is now £343,540.
The cost of insuring RBS bonds is now higher than before the taxpayer was forced to step in and rescue the bank in October 2008, and shows the recent dramatic downturn in sentiment among credit investors towards banks.
“The problem is a shortage of liquidity – that is what is causing the problems with the banks. It feels exactly as it felt in 2008,” said one senior London-based bank executive.
“I think we are heading for a market shock in September or October that will match anything we have ever seen before,” said a senior credit banker at a major European bank. [read full report]
Don’t forget about Morgan Stanley (MS):
The Truth Is Revealed About The Riskiest Bank On The Street – What Does That Say About The Newest Bank To Carry That Title?
The telling portion of this tale is today’s Bloomberg article illustrating a fact which we suspected, but which no one really knew for sure except Wall Street banking insiders, and that was that MS took $107 in loans from the Fed during 2008. More than any other entity in the history of the Fed, more than all of the banks who had both larger balance sheets and asset basis’ than MS, more than anybody. [read full report]
And Goldman Sachs…
The Squid Is A Federally (Tax Payer) Insured Hedge Fund Paying Fat Bonuses That Can’t Trade In Volatile Markets – Who’s Gonna Tell The Shareholders and Tax Payer?
… despite the entire “God’s Work” syndrome attached to Goldman Sachs, its prop desk is yet to exhibit the ability to generate true alpha in highly volatile market… [read full report]
Goldman Sachs TANKS After CEO Lloyd Blankfein Hires Famous Defense Lawyer
Is the Goldman Sachs CEO facing a new lawsuit?
The market seems to think so. Goldman Sachs just tanked in minutes before the close after news that Lloyd Blankfein hired a lawyer famous for defending vilified execs. It’s back up a bit since dropping over 5%, but the news is still concerning.
It’s unclear whether the lawyer is for him, Goldman Sachs, or both, but Goldman Sachs’s CEO Lloyd Blankfein hired Reid Weingarten, a high profile defense attorney who says “I’m used to these monstrously difficult cases where everybody hates my clients,” according to Reuters.
Reuters says the hire might have something to do with accusations of Blankfein’s committing perjury. Or something else:
One former federal prosecutor, who was not authorized to speak publicly, said Blankfein may have hired outside counsel after receiving a request from investigators for documents or other information. [read full report]
Speaking of hiring lawyers…
The Global Banking Cartel’s Crimes Are Being Exposed Left & Right…
Blowing Up In Their Face… Prepare for Shock & Awe…
BOOM! Moody’s exposed:
MOODY’S ANALYST BREAKS SILENCE: Says Ratings Agency Rotten To Core With Conflicts
A former senior analyst at Moody’s has gone public with his story of how one of the country’s most important rating agencies is corrupted to the core.
The analyst, William J. Harrington, worked for Moody’s for 11 years, from 1999 until his resignation last year.
From 2006 to 2010, Harrington was a Senior Vice President in the derivative products group, which was responsible for producing many of the disastrous ratings Moody’s issued during the housing bubble.
Harrington has made his story public in the form of a 78-page “comment” to the SEC’s proposed rules about rating agency reform….
Here are some key points:
* Moody’s ratings often do not reflect its analysts’ private conclusions. Instead, rating committees privately conclude that certain securities deserve certain ratings–but then vote with management to give the securities the higher ratings that issuer clients want.
* Moody’s management and “compliance” officers do everything possible to make issuer clients happy–and they view analysts who do not do the same as “troublesome.” Management employs a variety of tactics to transform these troublesome analysts into “pliant corporate citizens” who have Moody’s best interests at heart.
* Moody’s product managers participate in–and vote on–ratings decisions. These product managers are the same people who are directly responsible for keeping clients happy and growing Moody’s business.
* At least one senior executive lied under oath at the hearings into rating agency conduct. Another executive, who Harrington says exemplified management’s emphasis on giving issuers what they wanted, skipped the hearings altogether. [read full report]
BOOM! The SEC Caught Covering Up Wall Street Crimes:
Matt Taibbi Exposes How SEC Shredded Thousands of Investigations
An explosive new report in Rolling Stone magazine exposes how the U.S. Securities and Exchange Commission destroyed records of thousands of investigations, whitewashing the files of some of the nation’s largest banks and hedge funds, including AIG, Wells Fargo, Lehman Brothers, Goldman Sachs, Bank of America and top Wall Street broker Bernard Madoff. Last week, Republican Sen. Chuck Grassley of Iowa said an agency whistleblower had sent him a letter detailing the unlawful destruction of records detailing more than 9,000 information investigations. We speak with Matt Taibbi, the political reporter for Rolling Stone magazine who broke this story in his latest article….
KA-BOOM! The Fed And All Their Crony-Capitalist Cartel Members Exposed, Yet Again:
Wall Street Pentagon Papers Part III – Are The Federal Reserve’s Crimes Still Too Big To Comprehend?
Another day, another trillion plus in secret Federal Reserve “bailouts” revealed. Bloomberg News exposes this latest Fed “deal” after winning a long Freedom of Information Act (FOIA) legal battle to get the details on what was done with the American people’s money. Their report runs with an AmpedStatus style headline: “Wall Street Aristocracy Got $1.2 Trillion From Fed.”
The aristocracy is alive and well… thanks to the Fed, of course.
Keep in mind, this $1.2 trillion is in addition to the $16 trillion the Government Accountability Office (GAO) audit revealed and the over $2 trillion in Quantitative Easing the Fed dished out, not to mention the now continued promise of the Zero Interest Rate Policy (ZIRP). This is also separate from the $700 billion TARP program that Congress approved. This is yet another unknown secret program, throwing another mere $1.2 trillion in public money at the Wall Street elite (global banking cartel), just being revealed now.
Those of us paying attention over the past three years have had Fed crony-capitalism on steroids fatigue for awhile now. Nonetheless, this is deja vu all over again as another mindbogglingly huge story that must be covered comes to light.
Here are the details of this latest revelation:
[read full report]
Speaking of the $16 trillion GAO audit…
BOOM! GAO audit exposed, missing some vital details:
More on how the GAO’s Fed audit failed to disclose some dirty secrets about BlackRock and JP Morgan
In its review of the Fed’s outsourcing practices, it failed to mention the most damaging and suspicious sole-source (no bid) contract awarded to BlackRock, which was for handling the New York Fed’s toxic Bear Stearns portfolio, otherwise known as Maiden Lane. This contract would generate $108,000,000 in fees and was one of the largest awarded during the bailout period, but it might also have saved JP Morgan $1.1 billion in losses from its Bear Stearns acquisition….
Also, BlackRock was also one of the managers of the NY Fed’s separate $1.25 trillion MBS purchase program as part of QE1. Contrary to the lie on the NY Fed’s webpage (that the MBS auctions were conducted via competitive bidding), the NY Fed’s own purchasing manager, Brian Sack, admitted in a paper that, “the MBS purchases were arranged with primary dealer counterparties directly, [and] there was no auction mechanism to provide a measure of market supply.”
Putting it all together, it looks like Jamie Dimon signed off on hiring BlackRock for no justifiable reason to trade the very Maiden Lane portfolio that could have caused his bank, JP Morgan, to lose up to $1.1 billion. And, it was entirely possible that BlackRock saved the portfolio by trading the MBS portion of ML with the New York Fed directly as QE1 was underway. [read full report]
BOOM! Bear Stearns exposed:
Report Says Bear Stearns Executives Sold Illegal RMBS and Covered It Up
Former back office employees from Bear Stearns are coming out of the woodwork to explain how Tom Marano’s mortgage group cheated their own clients out of billions. This week I reported at The Distressed Debt Report, EMC insiders say they were told to make up the classification for whole loans, packaged into mortgage securities, to get them switched out of the trust. By classifying the loans as ‘prepaid’ or having ‘subsequent recoveries’ Bear employees were able to fool the trustee into giving them back loans they were not able to legally service. A move New York Attorney General Eric Schneiderman is actively investigating now.
In my latest DealFlow story we hear from EMC staffers who describe how subprime loans, that would have been sold by Bear Stearns trader Jeff Verschleiser’s team, never had a proper servicing license in West Virginia when they were packaged into the residential mortgage backed security. In 2003 Bear/EMC put $100 million of subprime loans from West Virginia into a few RMBS transactions. EMC, the banks wholly owned mortgage servicing shop, would service all of Bear’s RMBS after they were sold.
A year latter, when senior executies realized the mishap instead of Bear going out and informing their regulator and applying for a license, they orchestrated a cover up and even threaten EMC employees not to talk about it. [read full report]
The big banks are getting lit up!
You shall reap what you sow.
Karma is a … bit@h.
In closing, Big Picture Barry Ritholtz strikes right at the root of the problem with this excellent commentary:
Big Banks: Under-Capitalized, Overexposed, Opaque
Consider what was actually done in 2008-09, and you will understand why none of the underlying problems have been repaired:
• Bank holdings: Remain stuffed with declining assets, primarily in Housing and Derivative holdings. Another leg down in Housing could be nearly fatal. [this is coming]
• Transparency: Balance sheets are unnecessarily Opaque; Eliminating Fair value accounting via FASB 157 did not fix balance sheet problems, but instead allowed banks to hide them.
• Capitalization: Remains too thin; leverage should be mandated back to the pre-2005 rule change of no more than 12 to 1; As we have learned, management does not keep adequate capital unless mandated to do so (sufficient capital reserves cuts into profits);
• Misaligned Incentives: Compensation and bonus schemes were not significantly changed after bailouts, except during loan repayments. Thus, management and traders still have the same upside to roll the dice, but do not have the downside risks, which remains on shareholders and taxpayers;….
What we have today instead is an over concentrated set of banking behemoths, barely off life support. Many of these remain mortally wounded by the holdings — holdings that they would have to shed through a healthy reorg.
The recent downturn in the banking sector? I suspect it amounts to nothing more than a credible bet that these banks are not in any condition to withstand the next recession. A rise in unemployment and another next leg down in Housing could very well be fatal. [this is coming]
If the banks come crawling back to Uncle Sam for another bailout, it will be proof that “rescuing” failing financial institutions that blow themselves up is the exact wrong strategy.
Real Capitalists know failure is part of the process. I suspect we may have another chance at a banking reorg. Let’s hope we do it correctly this time. [read full report]
Not holding my breath. As the banking system comes undone once again, things are going to get downright Medieval around here – you can take that to the bank.
Speaking of feudalism…
Until the reorg / collapse comes, as former Citigroup CEO Chuck Prince infamously said, “As long as the music is playing, you’ve got to get up and dance. We’re still dancing.”
Yep, they’re still dancing… dancing to the Crocodile Rock:
Financiers Party While Economy Plunges
A full moon rises over the Hamptons as the crocs come out to play.
While the world economy trembles and their fellow Americans face blown-up 401Ks, foreclosure threats, and fruitless job searches, financiers are embracing our current feed-the-rich/screw-the-rest mentality with renewed zest.
The NYT reports that last Saturday night, in the fabled NYC frolicking ground of Southampton, billionaire financier Leon D. Black threw himself a jaw-droppingly expensive 60th birthday bash. Two hundred well-heeled guests reclined on cushions Satyricon-style nibbling seared fois gras as Sir Elton John — earning a cool million bucks — sang ‘Crocodile Rock.’
Joining this Reptilian Cotillion were Martha Stewart and fashion designer Vera Wang, who partied alongside some of Wall Street’s most notorious denizens, including junk-bond pioneer Michael Milken, Blackstone’s buyout king Stephen A. Schwarzman (who became a symbol of greed when he threw his own $3 million b-day bash back in bubblicious 2007), and Lloyd “God’s Work” Blankfein of Goldman Sachs.
Mayor Bloomberg was among the revelers, as was NY Senator Charles Schumer, who must have been feeling grateful for his host’s generous political contributions as he soaked in the expansive view of moonlit Schinnecock Bay. [read full report]
Unfortunately, I heard Marie Antoinette couldn’t make it.
Don’t worry though, Britney did perform her latest hit song:
“We ain’t stoppin’! Keep on dancin’… til the world ends.”